2009 20f annual report

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ANNUAL REPORTROYAL DUTCH SHELL PLC ANNUAL REPORT AND FORM 20-F

FOR THE YEAR ENDED DECEMBER 31, 2009


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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 20-FANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

Commission file number 1-32575

Royal Dutch Shell plc(Exact name of registrant as specified in its charter)

England and Wales(Jurisdiction of incorporation or organisation)

Carel van Bylandtlaan 30, 2596 HR, The Hague, The NetherlandsTel. no: 011 31 70 377 9111

(Address of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class Name of Each Exchange on Which Registered

American Depositary Receipts representing Class A ordinary sharesof the issuer of an aggregate nominal value e0.07 each

New York Stock Exchange

American Depositary Receipts representing Class B ordinary shares ofthe issuer of an aggregate nominal value of e0.07 each

New York Stock Exchange

1.30% Guaranteed Notes due 2011 New York Stock Exchange5.625% Guaranteed Notes due 2011 New York Stock ExchangeFloating Guaranteed Notes due 2011 New York Stock Exchange4.95% Guaranteed Notes due 2012 New York Stock Exchange4.0% Guaranteed Notes due 2014 New York Stock Exchange3.25% Guaranteed Notes due 2015 New York Stock Exchange5.2% Guaranteed Notes due 2017 New York Stock Exchange4.3% Guaranteed Notes due 2019 New York Stock Exchange6.375% Guaranteed Notes due 2038 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the ActNone

Securities for which there is a reporting obligation pursuant to Section 15(d) of the ActNone

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period coverby the annual report.

Outstanding as of December 31, 2009:3,454,731,900 Class A ordinary shares of the nominal value of e0.07 each.2,667,562,105 Class B ordinary shares of the nominal value of e0.07 each.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. ¥ Yes n

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934. n Yes ¥

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. ¥ Yes n

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¥ Accelerated filer n Non-accelerated filer n

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP n International Financial Reporting Standards as issued by the International Accounting Standards Board ¥ Other n

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registranthas elected to follow. Item 17 n Item 18 n

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). n Yes ¥

Copies of notices and communications from the Securities and Exchange Commission should be sent to:

Royal Dutch Shell plcCarel van Bylandtlaan 30

2596 HR, The Hague, The NetherlandsAttn: Mr. M. Brandjes


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ABOUT THIS REPORT

This Report serves as the Annual Report and Accounts in accordancewith UK requirements and as the Annual Report on Form 20F as filedwith the US Securities and Exchange Commission (SEC) for the yearended December 31, 2009, for Royal Dutch Shell plc (the Company)

and its subsidiaries (collectively known as Shell). It presents theConsolidated Financial Statements of Shell (pages 97139) and theParent Company Financial Statements of Shell (pages 159167). Crossreferences to Form 20F are set out on pages 175176 of this Report.

In this Report “Shell” is sometimes used for convenience wherereferences are made to the Company and its subsidiaries in general.Likewise, the words “we”, “us” and “our” are also used to refer tosubsidiaries in general or to those who work for them. Theseexpressions are also used where no useful purpose is served byidentifying the particular company or companies. “Subsidiaries”,“Shell subsidiaries” and “Shell companies” as used in this Report referto companies over which the Company, either directly or indirectly, hascontrol through a majority of the voting rights or the right to exercise

control or to obtain the majority of the benefits and be exposed to themajority of the risks. The Consolidated Financial S tatementsconsolidate the financial statements of the Parent Company and allsubsidiaries. The companies in which Shell has significant influence butnot control are referred to as “associated companies” or “associates”and companies in which Shell has joint control are referred to as“jointly controlled entities”. Joint ventures are comprised of jo intlycontrolled entities and jointly controlled assets. In this Report,associates and jointly controlled entities are also referred to as “equityaccounted investments”.

The term “Shell interest” is used for convenience to indicate the directand/or indirect (for example, through our 34% shareholding inWoodside Petroleum Ltd.) ownership interest held by Shell in a venture,

partnership or company, after exclusion of all thirdparty interests.

Except as otherwise specified, the figures shown in the tables in thisReport represent those in respect of subsidiaries only, without deductionof minority interest. However, the term “Shell share” is used forconvenience to refer to the volumes of hydrocarbons that are produced,processed or sold through both subsidiaries and equityaccountedinvestments. All of a subsidiary’s production, processing or salesvolumes are included in the Shell share, even if Shell owns less than100% of the subsidiary. In the case of equityaccounted investments,however, Shellshare figures are limited only to Shell’s entitlement. In allcases, royalty payments in kind are deducted from the Shell share.

The Financial Statements contained in this Report have been prepared

in accordance with the provisions of the Companies Act 2006,Article 4 of the International Accounting Standards (IAS) Regulationand with both International Financial Repor ting Standards (IFRS) asissued by the International Accounting Standards Board (IASB) andIFRS as adopted by the European Union. IFRS as defined aboveincludes International Financial Reporting Interpretations Committee(IFRIC) interpretations.

Except as otherwise noted, the figures shown in this Report are stated inUS dollars. As used herein all references to “dollars” or “$” are to theUS currency.

The Business Review (BR) and other sections of this Report containforwardlooking statements (within the meaning of the United States

Private Securities Litigation Reform Act of 1995) concerning thefinancial condition, results of operations and businesses of Shell. Astatements other than statements of historical fact are, or may bedeemed to be, forwardlooking statements. Forwardlooking statemare statements of future expectations that are based on managemecurrent expectations and assumptions and involve known and unkrisks and uncertainties that could cause actual results, performance

events to differ materially from those expressed or implied in thesestatements. Forwardlooking statements include, among other thingstatements concerning the potential exposure of Shell to market risand statements expressing management’s expectations, beliefs,estimates, forecasts, projections and assumptions. These forwardlooking statements are identified by their use of terms and phrasesas “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”“intend”, “may”, “objectives”, “outlook”, “plan”, “probably”,“project”, “risks”, “scheduled”, “seek”, “should”, “target”, “will” asimilar terms and phrases. There are a number of factors that couldaffect the future operations of Shell and could cause those results todiffer materially from those expressed in the forwardlooking stateincluded in this Report, including (without limitation): (a) pricefluctuations in crude oil and natural gas; (b) changes in demand fo

Shell’s products; (c) currency fluctuations; (d) drilling and productiresults; (e) reserve estimates; (f) loss of market share and industrycompetition; (g) environmental and physical risks; (h) risks associawith the identification of suitable potential acquisition properties atargets, and successful negotiation and completion of suchtransactions; (i) the risk of doing business in developing countries acountries subject to international sanctions; (j) legislative, fiscal anregulatory developments including regulatory measures as a resulclimate changes; (k) economic and financial market conditions invarious countries and regions; (l) political risks, including the risks expropriation and renegotiation of the terms of contracts withgovernmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and(m) changes in trading conditions. Also see “Risk factors” for addit

risks and further discussion. All forwardlooking statements containin this Report are expressly qualified in their entirety by the cautionstatements contained or referred to in this section. Readers should place undue reliance on forwardlooking statements. Each forwardlooking statement speaks only as of the date of this Repor t. NeitheCompany nor any of its subsidiaries undertake any obligation topublicly update or revise any forwardlooking statement as a resulnew information, future events or other information. In light of thesrisks, results could differ materially from those stated, implied orinferred from the forwardlooking statements contained in this Rep

This Report contains references to Shell’s website. These referencefor the readers’ convenience only. Shell is not incorporating byreference any information posted on www.shell.com.

Documents on display Documents concerning the Company, or its predecessors for reporpurposes, which are referred to in this Report have been filed with SEC and may be examined and copied at the public reference facmaintained by the SEC at 100 F Street, N.E., Room 1580,Washington, D.C. 20549. For further information on the operatiothe public reference room and the copy charges, please call the SE(800) SEC0330. All of the SEC filings made electronically by Sheavailable to the public at the SEC website at www.sec.gov (commifile number 132575). This Report, as well as the Annual Review, iavailable, free of charge, at www.shell.com/annualreport or at thoffices of Shell in The Hague, the Netherlands and London, UK. Yomay also obtain copies of this Repor t, free of charge, by mail.

2 Shell Annual Report and Form 20F 2009About this Report


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ABBREVIATIONS

CURRENCIES

$ US dollar

£ sterling

¤ euro

CHF Swiss franc

C$ Canadian dollar

UNITS OF MEASUREMENT

acre approximately 0.4 hectares or 4 square kilometres

b(/d) barrels (per day)

bcf/d billion cubic feet per day

boe(/d) barrel of oil equivalent (per day); natural gas has been converted to oil

equivalent using a factor of 5,800 scf per barrel

(k)dwt (thousand) deadweight tonnes

MMBtu million British thermal units

mtpa million tonnes per annum

MW megawatts

per day volumes are converted to a dai ly basis using a calendar year

scf standard cubic feet

PRODUCTS

GTL gas to liquids

LNG liquefied natural gas

LPG liquefied petroleum gas

NGL natural gas liquids

MISCELLANEOUS

ADR American Depositary Receipt

AGM Annual General Meeting

CO2 carbon dioxide

DBP deferred bonus plan

EMTN euro mediumterm note

FID final investment decisionGHG greenhouse gas

HSSE health, safety, security and environment

I FRIC Interna tional F inancial Report ing Interpre ta tions Commi ttee

IFRS International Financial Reporting Standards

LTIP longterm incentive plan

NGO nongovernmental organisation

OML onshore oil mining lease

OPEC Organization of the Petroleum Exporting Countries

OPL oil prospecting licence

PSA productionsharing agreement

PSC productionsharing contract

PSP performance share plan

R&D research and development

REMCO Remuneration CommitteeRSP restricted share plan

SEC United States Securities and Exchange Commission

TRCF total recordable case frequency

WTI West Texas Intermediate

Shell Annual Report and Form 20F 2009 3About this Report


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TABLE OF CONTENTS

5 Our locations6 Chairman’s message7 Chief Executive Officer’s review8 Business Review

8 Key performance indicators10 Selected financial data11 Business overview13 Risk factors16 Summary of results and strategy19 Upstream38 Downstream44 Corporate45 Liquidity and capital resources49 Our people50 Environment and society53 The Board of Royal Dutch Shell plc56 Senior Management57 Report of the Directors

60 Directors’ Remuneration Report76 Corporate governance87 Additional shareholder information96 Consolidated Financial Statements140 Supplementary information – oil and gas158 Parent Company Financial Statements170 Royal Dutch Shell Dividend Access Trust Financial Statements177 Exhibits

4 Shell Annual Report and Form 20F 2009About this Report


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OUR LOCATIONSUpstream Downstream

Europe

Austria m m

Belgium m

Bulgaria m

Czech Republic m

Denmark m m

Finland m

France m

Germany m m

Gibraltar m

Greece m m

Hungary m m

Ireland m m

Italy m m

Luxembourg m

The Netherlands m m

Norway m m

Poland m

Portugal m

Slovakia m m

Slovenia m

Spain m m

Sweden m m

Switzerland m

UK m m

Ukraine m m

Asia

Brunei m m

China m m

Guam m

India m m

Indonesia m

Iran m mIraq m

Japan m m

Jordan m

Kazakhstan m

Laos m

Malaysia m m

Oman m m

Pakistan m m

Papua New Guinea m

Philippines m m

Qatar m

Russia m m

Saudi Arabia m m

Singapore m mSouth Korea m m

Sri Lanka m

Syria m

Taiwan m

Thailand m

Turkey m m

United Arab Emirates m m

Vietnam m

Australia/Oceania

Australia m m

New Zealand m m

Upstream Downstream

Africa

Algeria m m

Benin m

Botswana m

Burkina Faso m

Cameroon m

Cape Verde Islands m

Côte d’Ivoire m

Egypt m m

Gabon m

Ghana m m

Guinea m

Kenya m

Libya m

Madagascar m

Mali m

Mauritius m

Morocco m m

Namibia m

Nigeria m

La Réunion m

Senegal m

South Africa m m

Tanzania m

Togo m

Tunisia m m

Uganda m

North America

Barbados m

Canada m m

Costa Rica m

Dominican Republic m

El Salvador mMexico m m

Panama m

Puerto Rico m

Trinidad & Tobago m

USA m m

South America

Argentina m m

Brazil m m

Chile m

Colombia m m

French Guiana m

Guyana m

Peru m

Venezuela m m

Shell Annual Report and Form 20F 2009 5Our locations


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CHAIRMAN’S MESSAGE

In 2009 the world felt the acute effects of the global recession. Oildemand experienced its steepest drop since 1982. Consumption of natural gas in the European Union fell more than it ever has before.Refining margins were put under great pressure, as were the margins in

the petrochemicals business. Financing of projects tightened as banksrebuilt their balance sheets. And the treasuries of many countries cameunder severe strain.

By the end of 2009, unprecedented economicstimulus packages andthe irrepressible growth of key Asian nations appeared to turn aroundthe global economy. But weak consumer demand and lingeringunemployment in the USA and Europe are likely to weigh down therecovery for some time.

We responded swiftly to the downturn, restructuring Shell to make itmore competitive. And we did so without diluting the talents that makeour company strong. At the same time, we retained our longterm view.We stuck to our capitalspending plans throughout 2009 and continued

working on the energy projects that form the foundations of our future.

With economic recovery, global demand for energy will resume itsgrowth, in step with increasing population and rising wealth indeveloping countries. Supplies of all kinds of energy – not just oil andgas but also renewables – will struggle to keep pace. And even whileenergy use grows, carbon dioxide (CO2) emissions must be kept incheck.

As the world evolves toward a lowcarbon energy system in the yearsand decades ahead, our unrivalled tradition of technical innovationpositions us well.

Our technology enables us to find and produce crude oil and natugas in hardtoreach places, from the deep ocean to the frozen Arcwill one day enable us to produce transport fuels from unusual sousuch as agricultural waste.

We are already applying our technology to capitalise on our suppof natural gas, the cleanestburning foss il fuel. When used to gene

electricity, it emits half the CO2 of coal. New production techniquehelp us coax it out of impermeable rock. We aim to maintain ourleading position in liquefied natural gas, allowing us to extract gafarflung locations and transport it to markets in seagoing tankers.are also turning natural gas into highperformance lubricants and transport fuels. All of this means that by 2012 more than half of ouproduction will be natural gas.

Shell excels at applying technology to complex projects on a massscale. The offshore fields that we recently brought onstream in Braand Russia attest to that. We are following a similar projectengineapproach in several demonstration projects to capture CO2 and stsafely underground.

We are also working to squeeze more value out of every unit of enwe use in our operations. And we are introducing new products anservices that help our customers become more efficient energyusethemselves.

Making the world’s energy supply secure, affordable and sustainanot just a worthy goal; it is a global imperative. It will take time, anwill take a lot of effort. But with our farsightedness and technicalprowess, we can contribute to the endeavour even as we deliver thresults that our shareholders expect in the long term.

Jorma OllilaChairman

6 Shell Annual Report and Form 20F 2009Chairman’s message


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CHIEF EXECUTIVE OFFICER’S REVIEW

It is a privilege for me to give my first review of Shell’s performance asits Chief Executive Officer. I am proud to report how these trying timeshave brought out some of our best qualities.

Our new field developments and rampups produced enough oi l andgas in 2009 to offset the natural decline of our older fields. Thereliability of our refineries also improved. We reduced underlyingoperating costs by more than $2 billion. And our cash inflows andoutflows were broadly balanced in both Upstream and Downstream.

But despite our best efforts, 2009 earnings amounted to $12.7 billion,down from $26.5 billion the year before. The reasons for the drop spanall our businesses. Our production decreased because of lowerdemand for natural gas, although divestments and OPEC quotas werepartly responsible as well. Lower oil and gas prices also contributed tolower Upstream revenues. Global demand for oil products weakenedand refining margins declined to historical lows, reducing ourDownstream earnings. Lower sales volumes and margins affected our

chemicals performance.

Those tough economic realities highligh t the need for us to do better incontaining our costs and improving our competitiveness.

Our performance improved in 2009 in many of the areas we monitorrelated to sustainable development. Our occupational injury rate wasthe lowest we have ever recorded. However, tragically we did incur 20work related fatalities during 2009. To help bring down such fatalities –ideally to zero – we launched a set of safety rules to addressspecifically the worktime practices with the greatest risk to life.

We had a good year in 2009 in exploration. We discovered gas inshale formations of North America and off shore western Australia.

There were 11 notable discoveries. Additions to our proved reserveswere more than double our production volumes for the year.

We will continue to apply our exploration capabilities wherever theyare appropriate, including our new leases in Egypt, South Africa andFrench Guiana. Resources found will be matured into the project funnelthat drives our growth.

Several major projects already matured in our Upstream por tfolio in2009 – with several more set to reach firs t production within a few

years. Together with our partners, we completed Russia’s first liquef iednatural gas (LNG) plant, Sakhalin II, one of the world’s largestintegrated projects.

In 2009, the Parque das Conchas project offshore Brazil begandelivering heavy oil from fields in waters two kilometres deep. In 2010our Perdido platform in the Gulf of Mexico will tap fields ly ing undermore than three kilometres of water – a world record. At such depthssophisticated subsea equipment is needed, and it has to be built on siteby remotecontrolled machines in nearfreezing darkness.

Our Pearl gas to liquids project in Qatar will apply Shell technology toconvert some 1.6 billion cubic feet of gas per day into liquid transportfuel and other highquality oil products and petrochemical feedstocks.The Qatargas 4 project will take about the same amount of gas andturn it into LNG. Both projects are progressing well; construction isexpected to be completed by the end of 2010 with production rampupin 2011.

We have agreed with our partners to begin construction on one of theworld’s largest natural gas developments: the Gorgon offshore gasfield of Australia. The project will nearly double Australia’s LNG output.It is also expected to pioneer the large scale capture and storage of carbon dioxide.

In late 2009, we secured an important position in Iraq with the

government contract for developing the Majnoon field – a huge field ina country with great potential.

Our Downstream portfolio will need to be carefully reassessed in viewof the overcapacity in the refining industry and the growth potential forpetrochemicals in Asia. But some new business oppor tunities werealready opened up by 2009 developments.

Our new lubricants complex in Zhuhai – our sixth such facility inChina – will help us to supply the world’s fastestgrowing lubricantsmarket. With the potential for expansion, the complex could becomeone of Shell’s top three lubricants blending plants.

We also started up the first of several new advanced processing units at

the Shell Eastern Petrochemicals Complex in Singapore. All the newunits are expected to be up and running in 2010, reinforcing ourambition to maintain a leading position in the regional market.

We have expanded our association with Iogen and Codexis to developbetter enzymes and processes for the production of biofuels from straw.In early 2010 we announced our intention to form a $12 billion jointventure with Cosan in Brazil for the production, supply, distribution andretailing of ethanolbased transport fuels.

Our successful projects, our new business opportunities and ourcontinued financial flexibility give me confidence to face the economicuncertainties of 2010. Thereafter, a period of production and cashflowgrowth awaits us. To reach it, we will have to rely even more on

technical ingenuity, project management and operational excellence –the very things that distinguish us from our competitors.

To channel our skills more quickly, more effectively and moreeconomically, last year I reorganised our business units. One of themain aims was to concentrate in one unit the accountabilities fordelivering major new projects and developing new technologies. Thatwill better position us to execute Upstream operations and secureaccess to resources. It will also help us better manage the manyenvironmental and societal issues associated with developing oil andgas fields.

These changes, which were implemented shor tly after I took on theposition of CEO, were not a reaction to transien t tough times. In the

short term they did accelerate our plans to reduce complexity,overheads and – ultimately – costs. But in the long term they willimprove our performance by sharpening our external focus and givingadded impetus to our technology and innovation.

I look forward to seeing our revitalised organisation succeed in 2010and beyond.

Peter VoserChief Executive Officer

Shell Annual Report and Form 20F 2009 7Chief Executive Officer’s review


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BUSINESS REVIEW

KEY PERFORMANCE INDICATORS

Shell scorecard

Total shareholder return

2009 22.6% 2008 (33.5)%

Total shareholder return (TSR) is the difference between the share priceat the start of the year and the share price at the end of the year, plusgross dividends paid during the calendar year (reinvested quarterly),expressed as a percentage of the yearstart share price. The TSRs of major publiclytraded oil and gas companies can be directly

compared, providing a way to determine how Shell is performingagainst its industry peers.

Net cash from operating activities ($ billion)

2009 21 2008 44

Net cash from operating activities is the total of all cash receipts andpayments associated with our sales of oil, gas, chemicals and otherproducts. The components that provide a reconciliation from income forthe period are listed in the Consolidated Statement of Cash Flows onpage 100. This indicator reflects Shell’s ability to generate cash forinvestment and distributions to shareholders. For scorecard purposesonly, it is adjusted to exclude taxes paid on divestments.

Production available for sale (thousands boe/d)

2009 3,142 2008 3,248

Production is the sum of all average daily volumes of unrefined oil andnatural gas produced for sale. The unrefined oil comprises crude oil,natural gas liquids and synthetic crude oil. The gas volume is convertedinto energyequivalent barrels of oil to make the summation possible.Changes in production have a significant impact on Shell’s cash flow.

Sales of liquefied natural gas (million tonnes)

2009 13.4 2008 13.1

Sales of liquefied natural gas (LNG) is a measure of the operationalexcellence of Shell’s Upstream business and the LNG market demand.

Refinery and chemical plant availability 2009 93.3% 2008 92.5%

Refinery and chemical plant availability is the weighted average oactual uptime of plants as a percentage of their maximum possibleuptime. The weighting is based on the capital employed. It excludedowntime due to uncontrollable factors, such as hurricanes. Thisindicator is a measure of operational excellence of Shell’s Downstmanufacturing facilities.

Total reportable case frequency (injuries per million working h

2009 1.4 2008 1.8

Total reportable case frequency (TRCF) is the number of staff orcontractor injuries requiring medical treatment or time off for everymillion hours worked. It is a standard measure of occupational safe

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Additional performance indicators

Operational spills over 100 kilograms2009 264 2008 275

Operational spills are the total number of spills of oil and oil productsover 100 kilograms per spill that resulted from our operations.

Employees (thousands)

2009 101 2008 102

Employees is the number of notional fulltime employees whose workhours would be equivalent to those of all staff actually holding fulltimeand parttime employment contracts with Shell subsidiaries, averagedthroughout the year.

Income for the period ($ million)

2009 12,718 2008 26,476

Income for the period is the total of all the earnings from every businesssegment. It is of fundamental importance for a sustainable commercialenterprise.

Return on average capital employed

2009 8.0% 2008 18.3%

Return on average capital employed (ROACE) is defined as annual

income, adjusted for aftertax interest expense, as a percentage of average capital employed during the year. Capital employed is the sumof total equity and total debt. ROACE measures the efficiency of Shell’sutilisation of the capital that it employs and is a common measure of business performance; see page 48.

Gearing

2009 15.5% 2008 5.9%

Gearing is defined as net debt (total debt minus cash and cashequivalents) as a percentage of total capital (net debt plus total equity),at December 31. It is a measure of the degree to which Shell’soperations are financed by debt. (For fur ther information see Note 16

to the Consolidated Financial Statements.)

Reserves

Proved oil and gas reserves (million boe)2009 14,132 2008 10,903

Proved oil and gas reserves (excluding minority interest) are the totalestimated quantities of oil and gas that geoscience and engineeringdata demonstrate with reasonable certainty to be recoverable in future

years from known reservoirs, as at December 31, under existingeconomic and operating conditions. Gas volumes are converted intobarrels of oil equivalent (boe). Reserves are crucial to an oil and gascompany, since they constitute the source of future production. Reservesestimates are subject to change based on a wide variety of factors,some of which are unpredictable; see pages 13 to 15. The provedreserves volumes reported for 2009 have been established using thenew SEC rules on oil and gas reporting.

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SELECTED FINANCIAL DATA

The selected financial data set out below is derived, in part, from the Consolidated Financial Statements. This data should be read in conjunctiowith the Consolidated Financial Statements and related Notes, as well as the Business Review in this Report.

CONSOLIDATED STATEMENT OF INCOME AND OF COMPREHENSIVE INCOME DATA $ MIL

2009 2008 2007 2006

Revenue 278,188 458,361 355,782 318,845 306

Income from continuing operations 12,718 26,476 31,926 26,311 26

Income/(loss) from discontinued operations – – – –

Income for the period 12,718 26,476 31,926 26,311 26

Income attributable to minority interest 200 199 595 869

Income attributable to Royal Dutch Shell plc shareholders 12,518 26,277 31,331 25,442 25

Comprehensive income attributable to Royal Dutch Shell plc

shareholders 19,141 15,228 36,264 30,113 20

CONSOLIDATED BALANCE SHEET DATA $ MIL

2009 2008 2007 2006

Total assets 292,181 282,401 269,470 235,276 219

Total debt 35,033 23,269 18,099 15,773 12Share capital 527 527 536 545

Equity attributable to Royal Dutch Shell plc shareholders 136,431 127,285 123,960 105,726 90

Minority interest 1,704 1,581 2,008 9,219 7

EARN IN GS PER SHARE

2009 2008 2007 2006

Basic earnings per ¤0.07 ordinary share 2.04 4.27 5.00 3.97

from continuing operations 2.04 4.27 5.00 3.97

from discontinued operations – – – –

Diluted earnings per ¤0.07 ordinary share 2.04 4.26 4.99 3.95

from continuing operations 2.04 4.26 4.99 3.95

from discontinued operations – – – –

SHARES NUM

2009 2008 2007 2006

Basic weighted average number of Class A and B shares 6,124,906,119 6,159,102,114 6,263,762,972 6,413,384,207 6,674,179

Diluted weighted average number of Class A and B shares 6,128,921,813 6,171,489,652 6,283,759,171 6,439,977,316 6,694,42

OTHER FINANCIAL DATA $ MIL

2009 2008 2007 2006

Net cash from operating activities 21,488 43,918 34,461 31,696 30

Net cash used in investing activities 26,234 28,915 14,570 20,861 8

Dividends paid 10,717 9,841 9,204 8,431 10

Net cash used in financing activities 829 9,394 19,393 13,741 18

(Decrease)/increase in cash and cash equivalents (5,469) 5,532 654 (2,728) 2Earnings by segment

Upstream 8,354 26,506 18,094 17,852 15

Downstream 3,054 39 12,445 8,165 10

Corporate 1,310 (69) 1,387 294

Total 12,718 26,476 31,926 26,311 26

Capital investment [A]

Upstream 23,951 32,166 21,362 20,281 13

Downstream 7,510 6,036 5,295 4,346 3

Corporate 274 242 415 269

Total 31,735 38,444 27,072 24,896 17

[A] Capital expenditure, exploration expense and new equity and loans in equity-accounted investments.

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BUSINESS OVERVIEW

History From 1907 until 2005, Royal Dutch Petroleum Company (Royal Dutch)and The “Shell” Transport and Trading Company, p.l.c. (ShellTransport) were the two public parent companies of a group of

companies known collectively as the “Royal Dutch/Shell Group”(Group). Operating activities were conducted through the subsidiariesof Royal Dutch and Shell Transport. In 2005, Royal Dutch Shell plc(Royal Dutch Shell) became the single parent company of Royal Dutchand Shell Transport, the two former public parent companies of theGroup (the Unification).

Royal Dutch Shell plc (the Company) is a public limited companyregistered in England and Wales and headquartered in The Hague, theNetherlands.

ActivitiesShell is one of the world’s largest independent oil and gas companies interms of market capitalisation, operating cash flow and oil and gas

production. Our oil and gas producing heartlands are the corecountries that have the available infrastructure, expertise andremaining growth potential for Shell to sustain strong operationalperformance and support continued investment. They are Australia,Brunei, Canada, Denmark, Malaysia, the Netherlands, Nigeria,Norway, Oman, the UK and the USA. Russia represents a newheartland with Sakhalin II onstream in 2009, and we expect Qatar tobecome a heartland in the coming years.

We are bringing new oil and gas supplies on stream from major fielddevelopments. We are also investing in growing our gasbasedbusiness through liquefied natural gas (LNG) and gas to liquids (GTL)projects. For example, we are building one of the world’s largest GTLprojects in Qatar, and we are participating in the Gorgon LNG project

in Australia.

At the same time, we are exploring for oil and gas in prolific geologicalformations that can be conventionally developed, such as those foundin the Gulf of Mexico, Brazil and Australia. But we also are exploringfor hydrocarbons in formations, such as lowpermeability gas reservoirsin the USA, Canada and China, which can be economically developedonly by unconventional means.

We also have a diversified and balanced portfolio of refineries andchemicals plants and are a major distributor of biofuels. We have thelargest retail portfolio of our peers, and delivered strong growth indifferentiated fuels. We have a strong position not on ly in the majorindustrialised countries but also in the developing ones. The distinctive

Shell pecten (a trademark in use since the early par t of the twentiethcentury) and trademarks in which the word Shell appears support thismarketing effort throughout the world.

OrganisationOn July 1, 2009, Peter Voser succeeded Jeroen van der Veer as Chief Executive Officer (CEO). On the same date, a series of changes in theorganisation and responsibilities of senior management becameeffective.

The changes were part of the reorganisation programme, called“Transition 2009”. The aim of the programme was to enhanceaccountability for operating performance and technology developmentwithin Shell’s organisation, thereby quickening decisionmaking and

execution as well as reducing costs.

BUSINESSES

Upstream International manages the upstream business outside theAmericas. It searches for and recovers crude oil and natural gas,liquefies and transports gas and operates the upstream and midstreaminfrastructure necessary to deliver oil and gas to market. UpstreamInternational also manages the global LNG business and the wind

business in Europe. The activities are organised within geographicalunits, some businesswide managed activities and supporting activities.

Upstream Americas manages the upstream business in North andSouth America. It searches for and recovers crude oil and natural gas,liquefies and transports gas and operates the upstream and midstreaminfrastructure necessary to deliver oil and gas to market. UpstreamAmericas also extracts bitumen from oil sands that is conver ted intosynthetic crude oil. Additionally, it manages the US based windbusiness. It comprises operations organised into businesswidemanaged activities and supporting activities.

Downstream manages Shell’s manufacturing, distribution andmarketing activities for oil products and chemicals. These activities are

organised into globally managed classes of business, includingchemicals, some regionally and globally managed activities andsupporting activities. Manufacturing and supply includes refining,supply and shipping of crude oil. Marketing sells a range of productsincluding fuels, lubricants, bitumen and liquefied petroleum gas (LPG)for home, transport and industrial use. Chemicals produces andmarkets petrochemicals for industrial customers, including the rawmaterials for plastics, coatings and detergents used in the manufactureof textiles, medical supplies and computers. Downstream also tradesShell’s flow of hydrocarbons and other energy related products,supplies the Downstream businesses, markets gas and power andprovides shipping services. Downstream also oversees Shell’s interestsin alternative energy (excluding wind) and CO2 management.

Projects & Technology manages the delivery of Shell’s major projectsand drives the research and innovation to create technology solutions.It provides technical services and technology capability covering bothUpstream and Downstream activities. It is also responsible for providingfunctional leadership across Shell in the areas of safety andenvironment and contracting and procurement.

SEGMENTAL REPORTING

With effect from July 1, 2009, Upstream consists of the activitiespreviously reported in the Exploration & Production, Gas & Power(excluding solar) and Oil Sands segments. It combines the operatingsegments Upstream International and Upstream Americas, which havesimilar economic characteristics and these operating segments aresimilar in respect of the nature of products and services, the nature of

production processes, type and class of customers and the methods of distribution. Downstream consists of the activities previously reported inthe Oil Products and Chemicals segments and solar. Upstream andDownstream earnings include their respective elements of Projects &Technology and of trading activities. Corporate represents the keysupport functions comprising holdings and treasury, headquarters,central functions and Shell’s insurance activities. Comparativeinformation in this Report has been reclassified.

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REVEN U E BY BU SIN ESS SEG MEN T( INCL UDING INTE R- SE GM E NT SA L E S) $ MILLION

2009 2008 2007

Upstream

Third parties 27,996 45,975 32,014

Intersegment 27,144 42,333 35,264

55,140 88,308 67,278

Downstream

Third parties 250,104 412,347 323,711

Intersegment 258 466 569

250,362 412,813 324,280

Corporate

Third parties 88 39 57

Intersegment – – –

88 39 57

REVEN U E BY G EO G RAPHICAL AREA [A ]( E XC LU DING INTE R- SE GME N T SA L E S) $ MILLION

2009 % 2008 % 2007 %

Europe 103,424 37.2 184,809 40.3 138,089 38.8

Africa, Asia,Australia/Oceania 80,398 28.9 120,889 26.4 90,141 25.3

USA 60,721 21.8 100,818 22.0 87,548 24.6

Other Americas 33,645 12.1 51,845 11.3 40,004 11.3

Total 278,188 100.0 458,361 100.0 355,782 100.0

[A] With effect from 2009, the reporting of third-party revenue by geographical

area has been changed to reflect better the location of certain business

activities. Comparative information is reclassified.

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RISK FACTORS

Shell’s operations and earnings are subject to risks from changingconditions in competitive, economic, political, legal, regulator y, social,industry, business and financial fields. These risks could have a materialadverse effect separately or in combination on Shell’s operational

performance, earnings or financial condition. Investors should carefullyconsider the risks below and the limitation of shareholder remediesassociated with our Articles of Association as discussed below.

Shell’s operating results and financial condition are exposed tofluctuating prices of crude oil, natural gas, oil products andchemicals.Prices of oil, natural gas, oil products and chemicals are affected bysupply and demand. Factors that influence supply and demand includeoperational issues, natural disasters, weather, political instability,conflicts, economic conditions and actions by major oilexportingcountries. Price fluctuations have a material effect on our earnings andour financial condition. For example, in a low oil and gas priceenvironment Shell would generate less revenue from its Upstream

production, and as a result certain longterm projects might becomeless profitable or even incur losses. Additionally, low oil and gas pricescould result in the debooking of oil or natural gas reserves, if theybecome uneconomic in this type of environment. Prolonged periods of low oil and gas prices, or rising costs, could also result in projectsbeing delayed or cancelled, as well as in the impairment of certainassets. In a high oil and gas price environment, we can experiencesharp increases in cost and under some productionsharing contractsour entitlement to reserves would be reduced. Higher prices can alsoreduce demand for our products. Lower demand for our products mightresult in lower profitability, particularly in our Downstream business.Oil and gas prices can move independently from each other.

Shell’s future hydrocarbon production depends on the delivery

of large and complex projects, as well as the abilityto replaceoil and gas reserves.We face numerous challenges in developing capital projects,especially large ones. Challenges include uncertain geology, frontierconditions, the existence and availability of necessary technology andengineering resources, availability of skilled labour, project delays andpotential cost overruns, as well as technical, fiscal, regulatory, politicaland other conditions. Such potential obstacles may impair our deliveryof these projects, as well as our ability to fulfil related contractualcommitments, and, in turn, adversely affect our operationalperformance and financial position. Future oil and gas production willdepend on our access to new proved reserves through exploration,negotiations with governments and other owners of known reserves,and acquisitions. Failure to replace proved reserves could result in

lower future production.

OIL AND GAS PRODUCTION AVAILABLE FOR SALE [A] MILLION BOE

2009 [B ] 2008 2007

Subsidiaries 828 846 886

Equityaccounted investments 319 314 295

Total 1,147 1,160 1,181

[A] Natural gas has been converted to oil equivalent using a factor of 5,800 s cf

per barrel.

[B] Includes synthetic crude oil production.

PROVED DEVELOPED AND UNDEVELOPEDRESERVES [A] [B ] (AT DE CE MB E R 31 ) MILLION BOE [C]

2009 [D] 2008 [E] 2007 [E]

Shell subsidiaries ( less minority interest) 9,846 7,078 6,669

Shell share of equityaccounted

investments 4,286 3,825 4,140

Total 14,132 10,903 10,809

[A] We manage our total proved reserves base without distinguishing between

proved oil and gas reserves associated with our equity-accounted i nvestments

and proved oil and gas reserves from subsidiaries.

[B] The SEC and FASB adopted revised standards for oil and gas reserves

reporting for 2009. Prior years’ reserves quantities h ave been determined on

the basis of the predecessor rules, accordingly proven minable oil sands

reserves of 997 million boe are not included in 2008 (2007: 1,111 million

boe).

[C] Natural gas has been converted to oil equivalent using a factor of 5,800 scf

per barrel.

[D] Includes proved reserves associated with future production that will be

consumed in operations and synthetic crude oil reserves.

[E] Does not include volumes expected to be produced and consumed in our

operations and synthetic crude oil reserves.

Shell’s ability to achieve its strategic objectives depends on ourreaction to competitive forces.We face significant competition in each of our businesses. While we tryto differentiate our products, many of them are competing incommoditytype markets. If we do not manage our expensesadequately, our cost efficiency might deteriorate and our unit costsmight increase. This in turn might erode our competitive position.Increasingly, we compete with staterun oil and gas companies,particularly in seeking access to oil and gas resources. Today, thesestaterun oil and gas companies control vastly greater quantities of oiland gas resources than the major publicly held oil and gas companies.Staterun entities have access to significant resources and may bemotivated by political or other factors in their business decisions which

may harm our competitive position or access to desirable projects.

An erosion of Shell’s business reputati on would have anegative impact on our licence to operate, our brand, ourability to secure new resources and our financial performance.Shell is one of the world’s leading energy brands, and our brand andreputation are important assets. The Shell General Business Principlesand Code of Conduct govern how Shell and our individual companiesconduct our affairs. While we seek to ensure compliance with theserequirements by all of our 101 thousand employees, it is a significantchallenge. Failure – real or perceived – to follow these principles, orother real or perceived failures of governance or regulatory compliancecould harm our reputation. This could impact our licence to operate,damage our brand, harm our ability to secure new resources and affect

our operational performance and financial condition.

Rising climate change concerns could lead to additionalregulatory measures that may result in project delays andhigher costs.Emissions of greenhouse gases and associa ted climate change are realrisks to Shell. In the future, in order to help meet the world’s energydemand, we expect more of our production to come fromunconventional sources than at present. Energy intensity of productionof oil and gas from unconventional sources can be higher than that of production from conventional sources. Therefore, in the long term, it isexpected that both the CO2 intensity of our production as well as ourabsolute CO2 emissions might increase, for example from theexpansion of oil sands activities in Canada. Also our Pearl GTL project

in Qatar is expected to increase our CO2 emissions when productionbegins. Over time, we expect that a growing share of our CO2

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emissions will be subject to regulation and carr y a cost. If we areunable to find economically viable as well as publicly acceptedsolutions that reduce our CO2 emissions for new and existing projectsor products, regulatory and/or political and societal pressures couldlead to project delays, additional costs as well as compliance andoperational risks.

The nature of Shell’s operations exposes us to a wide range ofsignificant health, safety, security and environment (HSSE)risks.The HSSE risks, to which we are potentially exposed, cover a widespectrum, given the geographic range, operational diversity andtechnical complexity of Shell’s daily operations. Shell has significantoperations in difficult geographies or climate zones, as well asenvironmentally sensitive regions which exposes us to the risk, amongstothers, of major process safety incidents, effects of natural disasters,social unrest, personal health and safety and crime. If a major HSSErisk, such as an explosion or hydrocarbon spill due to a process safetyincident, materialises, this could result in injuries, loss of life,environmental harm, disruption to business activities and, dependingon their cause and severity, material damage to Shell’s reputation.

Shell operates in over 90 countries, with differing degrees ofpolitical, legal and fiscal stability. This exposes us to a widerange of political developments and resulting changes to lawsand regulations.Developments in politics, laws and regulations can and do affect ouroperations and earnings. Potential developments include forceddivestment of assets; expropriation of property; cancellation of contractrights; additional windfall taxes and other retroactive tax c laims; importand export restrictions; foreign exchange controls; and changingenvironmental regulations. In our Upstream activities thesedevelopments could additionally affect land tenure, rewriting of leases,entitlement to produced hydrocarbons, production rates, royalties andpricing. Parts of our Downstream business are subject to price controls

in some countries. When such risks materialise they can affect theemployees, reputation, operational performance and financial positionof Shell as well as of the Shell companies located in the countryconcerned. If we do not comply with policies and regulations, it mayresult in regulatory investigations, lawsuits and ultimately sanctions.

Shell’s international operations expose us to social instability,terrorismand acts of war or piracy that could significantly impact our business.Social and civil unrest, both within the countries in which we operateand internationally, can and does affect operations and earnings.Potential developments that could impact our business includeinternational conflicts, including war, acts of political or economicterrorism and acts of piracy on the high seas, as well as civil unrest and

local security concerns that threaten the safe operation of our facilitiesand transport of our products . If such risks materialise, they can result ininjuries and disruption to business activities, which could have amaterial adverse effect on our operational performance and financialcondition, as well as our reputation.

Our investment in joint ventures and associated companiesmay reduce our degree of control as well as our ability toidentify and manage risks.Many of our major projects and operations are conducted in jointventures or associated companies. In certain cases, we may have lessinfluence over and control of the behaviour, performance and cost of operations in which a Shell company holds an interest. Additionally,our partners or members of a joint venture or associated company

(particularly local partners in developing countries) may not be able to

meet their financial or other obligations to the projects, threateningviability of a given project.

Reliable information technology (IT) systems are a criticalenabler of our operations.Organisational changes and process standardisation, which lead more reliance on a decreasing number of global systems, outsourc

and relocation of information technology services as well as increaregulations increase the risk that our IT systems may fail to deliverproducts, services and solutions in a compliant, secure and efficiemanner.

Shell’s future performance depends on successful developmand deployment of new technologies.Technology and innovation are essential to Shell. If we do not devethe right technology, do not have access to it or do not deploy iteffectively, it may affect the delivery of our strategy, our profitabilitand our financial condition.

The general macroeconomic environment as well as financand commodity market conditions influence Shell’s operati

results and financial condition as our business model involvtrading, treasury, interest rate and foreign exchange risksShell companies are subject to differing economic and financial mconditions throughout the world. Political or economic instability asuch markets. For example, if the current worldwide economicdownturn deepens or is prolonged, it could contribute to instabilityfinancial markets. Shell uses debt instruments such as bonds andcommercial paper to raise significant amounts of capital. Should oaccess to debt markets become more difficult, we might not be ablmaintain a level of liquidity required to fund the implementation ofstrategy. Trading and treasury risks include among others exposurmovements in commodity prices, interest rates and foreign exchanrates, counterparty default and various operational risks (see alsopages 8182). As a global company doing business in over 90

countries, we are exposed to changes in currency values and exchcontrols. While Shell does undertake some currency hedging, we not do so for all of our activities. The resulting exposure could affecearnings and cash flow (see Notes 4 and 23 to the ConsolidatedFinancial Statements).

The estimation of reserves is a process that involves subjecjudgements based on available information, so subsequendownward adjustments are possible. If actual production fsuch reserves is lower than current estimates indicate, ourprofitability and financial condition could be negatively impacted.The estimation of oil and gas reserves involves subjective judgemeand determinations based on available geological, technical,

contractual and economic information. The estimate may changebecause of new information from production or drilling activities ochanges in economic factors. It may also alter because of acquisitiand disposals, new discoveries and extensions of existing fields anmines, as well as the application of improved recovery techniquesPublished reserves estimates may also be subject to correction duethe application of published rules and guidance. Any downwardadjustment would indicate lower future production volumes and madversely affect our earnings as well as our financial condition.

The Company’s Articles of Association determine thejurisdiction for shareholder disputes. This might limitshareholder remedies.Our Articles of Association generally require that all disputes betw

our shareholders in such capacity and the Company or our subsid(or our Directors or former Directors) or between the Company and

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Directors or former Directors be exclusively resolved by arbitration inThe Hague, the Netherlands under the Rules of Arbitration of theInternational Chamber of Commerce. Our Articles of Association alsoprovide that if this provision is for any reason determined to be invalidor unenforceable, the dispute may only be brought in the courts of England and Wales. Accordingly, the ability of shareholders to obtainmonetary or other relief, including in respect of securities law claims,

may be determined in accordance with these provisions. Please see“Corporate governance” for further information.

Violations of antitrust and competit ion law pose a financial risk for Shell and expose Shell or our employees to criminalsanctions.Antitrust and competition laws apply to Shell companies in the vastmajority of countries in which we do business. Shell companies havebeen fined for violations of antitrust and competition law. These includea number of fines by the European Commission DirectorateGeneral forCompetition (DG COMP). Due to the DG COMP’s fining guidelines,any future conviction of Shell companies for violation of EuropeanUnion (EU) competition law could result in significantly enhanced fines.Violation of antitrust laws is a criminal offence in many countries, and

individuals can be either imprisoned or fined. Furthermore, it is nowcommon for persons or corporations allegedly injured by antitrustviolations to sue for damages.

An erosion of the business and operating environment inNigeria could adversely impact our earnings and financialposition.We face various risks in our Nigerian operations. These risks includesecurity issues surrounding the safety of our people, host communities,and operations, our ability to enforce existing contractual rights, limitedinfrastructure and potential legislation that could increase our taxes.The Nigerian government is contemplating new legislation to governthe petroleum industry which, if passed into law, would likely have asignificant influence on Shell’s existing and future activities in that

country and could adversely affect our financial returns from projects inthat country.

Shell has investments in Iran and Syria, countries against whichthe US government imposed sanctions. We could be subject tosanctions or other penalties in connection with these activities.US laws and regulations identify certain countries, including Iran andSyria, as state sponsors of terrorism and currently impose economicsanctions against these countries. Certain activities and transactions inthese countries are banned. Breaking these bans can trigger penaltiesincluding criminal and civil fines and imprisonment. For Iran, US lawsets a limit of $20 million in any 12month period on cer taininvestments knowingly made in that country, prohibits the transfer of goods or services made with the knowledge that they will contribute

materially to that country’s weapons capabilities and authorisessanctions against any company violating these rules (including denialof financings by the US export/import bank, denial of certain exportlicences, denial of certain government contracts and limits of loans orcredits from US financial institutions). However, compliance with thisinvestment limit by European companies is prohibited by CouncilRegulation No. 2271/96 adopted by the Council of the EU, whichmeans the statutes conflict with each other in some respects. WhileShell did not exceed the limit on investments in Iran in 2009, we haveexceeded it in the past and may exceed the USimposed investmentlimits in Iran in the future. While we seek to comply with legalrequirements in our dealings in these countries, it is possible that Shellor persons employed by Shell could be found to be subject to sanctionsor other penalties under this legislation in connection with their

activities in these countries.

Shell has substantial pension commitments, whose funding issubject to capital market risks.The risk regarding pensions is the ability to fund defined benefit plansto the extent that the pension assets fail to meet future liabilities.Liabilities associated with and cash funding of pensions can besignificant and are dependent on various assumptions. Volatility incapital markets and the resulting consequences for investment

performance as well as interest rates, may result in significant changesto the funding level of future liabilities. In case of a shor tfall, Shell mightbe required to make substantial cash contributions, depending on theapplicable regulations per country. For example, as a result of thefunding shortfall experienced at the end of 2008, employercontributions to defined benefit pension funds in 2009 were$3.6 billion higher than in 2008.

See “Liquidity and capital resources” for further discussion.

Shell companies face the riskof litigation and disputes worldwi de.From time to time cultural and political factors play a significant role inunprecedented and unanticipated judicial outcomes contrary to local

and international law. In addition, certain governments, states andregulatory bodies have, in the opinion of Shell, exceeded theirconstitutional authority by attempting unilaterally to amend or cancelexisting agreements or arrangements; by failing to honour existingcontractual commitments; and by seeking to adjudicate disputesbetween private litigants. Adverse outcomes in these areas could havea material effect on our operations and financial condition.

Shell is currently under investigation by the United StatesSecurities and Exchange Commission and the United StatesDepartment of Justice for violations of the US Foreign CorruptPractices Act.In July 2007, Shell’s US subsidiary, Shell Oil, was contacted by the USDepartment of Justice regarding Shell’s use of the freight forwarding

firm Panalpina, Inc and potential violations of the US Foreign CorruptPractices Act (FCPA) as a result of such use. Shell has an ongoinginternal investigation and is cooperating with the US Department of

Justice and the US Securities and Exchange Commission investigations.As a result of these investigations, Shell may face fines and additionalcosts.

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SUMMARY OF RESULTS AND STRATEGY

SEGMENT EARNINGS $ MILLION

2009 2008 2007

Upstream 8,354 26,506 18,094

Downstream 3,054 39 12,445

Corporate 1,310 (69) 1,387

Income for the period 12,718 26,476 31,926

Earnings 2009-2007The most significant factors affecting yeartoyear comparisons of earnings and cash flow generated by our operating activities are:changes in realised oil and gas prices; oil and gas production levels;and refining and marketing margins.

During 2009, oil prices increased, but the average price was lowerthan in 2008. Gas prices and refining margins declined sharply,because of weaker demand and high industry inventory levels. Oil andgas production available for sale in 2009 was 3,142 thousand barrelsof oil equivalent per day (boe/d), compared with 3,248 thousand

boe/d in 2008 (including mined oil sands production of 78 thousand b/d).

Earnings in 2009 were 52% lower than in 2008, when they were 17%lower than in 2007. The decrease reflected lower realised oil and gasprices and lower production in Upstream as well as lower margins andsales volumes in Downstream. These effects more than offset thepositive effect on earnings of increasing oil prices on inventory.

In 2009, Upstream earnings were $8,354 million, 68% lower than in2008 and 54% lower than in 2007. Earnings in 2009 reflected theeffect of significantly lower realised prices for both oil and gas incombination with lower production volumes. Moreover, the 2008earnings included significant gains from the divestment of various

assets. In 2008, earnings increased by 46% from 2007, mainlyreflecting higher realised oil and gas prices, partly offset by lowerproduction volumes.

Downstream earnings in 2009 were $3,054 million, compared with$39 million in 2008 and $12,445 million in 2007. When earnings areadjusted for the impact of changing oil prices on inventory, thenearnings in 2009 decreased significantly with respect to 2008 becauselower demand drove down our realised refining margins and most of our realised marketing margins in 2009. The adjusted earnings alsodecreased between 2007 and 2008 because of lower margins onchemical products, lower refining margins in the USA and higheroperating costs.

Balance sheet and capital investmentShell’s strategy to invest in the development of major growth projects,primarily in Upstream, explains the most significant changes to thebalance sheet in 2009. Property, plant and equipment increased by$19.6 billion mainly as a result of capital investment of $31.7 billion,17% lower than capital investment in 2008. The effect of capitalinvestment on property, plant and equipment was partly offset bydepreciation, depletion and amortisation of $14.5 billion in 2009.

Of the 2009 capital investment, $24 billion related to Upstreamprojects that will primarily deliver organic growth over the long term.These projects include several multibilliondollar, integrated facilitiesthat are expected to provide significant cash flows for the comingdecades. In 2009, the total debt increased by $11.8 billion. Overall,

total equity increased by $9.3 billion in 2009, to $138.1 billion.

The gearing ratio was 15.5% at the end of 2009, compared with 5at the end of 2008. The change reflects the increase of the total decombination with a decrease in the cash and cash equivalents posin 2009.

Market overview The demand for oil and gas is strongly linked to the strength of the g

economy. For that reason, projected economic growth is consideredindicator of the future demand for our products and services.

Following the extreme contraction in the global economy in the fouquarter of 2008 and first quarter of 2009 that was triggered by thesevere financial crisis in the USA and Europe, world output acceleover the remaining quarters of 2009. The recession ended in mostmajor economies by the third quar ter of the year. This turnaround wdue in part to the extraordinary macroeconomic stimulus and finansector supports implemented by governments and central banks tocontain the crisis. In this context, the global economy contracted b(0.8%) in 2009, down from growth of 3.2% in 2008 and 5.1% in2007.

In 2010, global output growth is expected to recover, but the recovis likely to be slow and uncertain given the depth of contraction in2009.

OIL AND NATURAL GAS PRICES

Oil prices rose steadily through 2009. Brent crude oil started the yat $40 per barrel and in midNovember reached the $78 mark, wis approximately where it ended the year. On average, however, 2prices were considerably lower than they were in 2008. Brent crudaveraged $61.55 per barrel in 2009, compared with $97.14 in2008, and West Texas Intermediate averaged $61.75 per barrel 2009, compared with $99.72 a year earlier.

Natural gas prices also spanned a wide range in 2009. The Henry

prices trended downwards between January and September: frommonthly average high of $5.27 per million British thermal units(MMBtu) in January down to a monthly low of $2.88 in Septemberwhen inventories were hitting an a lltime high and production had discouraged. From October until the end of 2009, however, Henrygas prices reversed the trend with the onset of winter weather. Ovethe Henry Hub gas price averaged $3.90 per MMBtu in 2009compared with $8.85 in 2008. In the UK, prices at the NationalBalancing Point averaged 30.93 pence/therm in 2009 compared58.06 pence/therm in 2008.

Unlike crude oil pricing, which is global in nature, gas prices can vsignificantly from region to region. Shell produces and sells naturain regions whose supply, demand and regulatory circumstances di

markedly from those of the US’s Henry Hub or the UK’s NationalBalancing Point. Natural gas prices in continental Europe and in thAsiaPacific region are predominantly indexed to oil pr ices. In Eurcontractual timelag effects resulted in a continued price declinethroughout the first half of 2009, while demand was at the same tiseverely impacted by the recession. Oilindexed prices started torecover in the fourth quarter, maintaining a very significant premiuabove the UK’s National Balancing Point.

OIL AND NATURAL GAS PRICES FOR INVESTMENT EVALUATIO

The range of possible future crude oil and natural gas prices used project and portfolio evaluations within Shell are determined afterassessment of short, medium and longterm price drivers underdifferent sets of assumptions. Historical analysis, trends and statist

volatility are all part of this assessment, as are analyses of possiblefuture economic conditions, geopolitics, OPEC actions, supply cos

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and the balance of supply and demand. Sensitivity analyses are used totest the impact of lowprice drivers, such as economic weakness, andhighprice drivers, such as strong economic growth and low investmentlevels in new production. Shortterm events, such as relatively warmwinters or cool summers, weatherand (geo)politicalrelated supplydisruptions, contribute to price volatility.

Shell expects oil prices to typically average $50 to $90 per barrel andscreens new upstream opportunities inside this range. Shell uses a gridbased on low, medium and high oil and gas prices to test the economicperformance of longterm projects. As part of our normal businesspractice, the range of prices used for this purpose is always subject toreview and change.

REFINING AND PETROCHEMICAL MARKET TRENDS

Refining margins were lacklustre in all key refining centres in 2009.Margins came under downward pressure with the reduced demand dueto the global recession. On top of that, there was significant refineryovercapacity following the startup of major refining facilities in Asia.

Demand for petrochemicals recovered during the second half of 2009,

as GDP growth resumed and restocking took place. Global ethylenedemand grew a little under 1% in 2009 after suffering a decline of over3% in 2008.

Industry refining margins in 2010 are likely to remain fundamentallyweak because of the expected ongoing global excess productinventory, particularly for middle distillates.

Strategy and outlook

STRATEGY

Our strategy seeks to reinforce our position as a leader in the oil andgas industry in order to provide a competitive shareholder return whilehelping to meet global energy demand in a responsible way.

Intense competition will remain for access to resources by our Upstreambusinesses and new markets by our Downstream businesses. Webelieve our technology, projectdelivery capability and operationalexcellence will remain key differentiators for our businesses.

In Upstream, we focus on exploration for new oil and gas reserves anddeveloping major projects where our technology and knowhow addsvalue to the resource holders. In our Downstream businesses, ouremphasis remains on sustained cash generation from our existingassets and selective investments in growth markets.

We will continue to focus on capital and cost discipline. We expectaround 80% of our capital investment in 2010 to be in our Upstream

projects. In Downstream, we aim to maintain relatively steady capitalemployed.

Meeting the growing demand for energy worldwide in ways thatminimise environmental and social impact is a major challenge for theglobal energy industry. We are committed to improving energyefficiency in our own operations, supporting customers in managingtheir energy demands and continuing to research and developtechnologies that increase efficiency and reduce emissions in oil andgas production.

Our commitment to technology and innovation continues to be at thecore of our strategy. As energy projects become more complex andmore technically demanding, we believe our technical expertise will be

a deciding factor in the growth of our businesses. Our key strengthsinclude the development and application of technology, the financial

and projectmanagement skills that allow us to deliver large oil and gasprojects, and the management of integrated value chains. We leverageour diverse and global business portfolio and customerfocusedbusinesses built around the strength of the Shell brand.

OUTLOOK

We have defined three distinct layers for Shell’s strategy development:

nearterm performance focus, mediumterm growth delivery andmaturing next generation project options.

Performance focus

In the nearterm, we will emphasise performance focus. We will workon continuous improvements in operating performance, with anemphasis on health, safety and environment, asset performance andoperating costs, including plans for $1 billion of cost savings in 2010.There will be asset sales of up to $3 billion per year as Shell exits fromnoncore positions across the company.

We have new initiatives that are expected to improve on Shell’sindustryleading Downstream, focusing on the most profitable positionsand growth potential. Shell has plans to exit from 15% of its worldwide

refining capacity and from selected retail and other marketingpositions, and is taking steps to improve the quality of its chemicalsassets.

We plan net capital investment of some $29 billion in 2010 (net capitalinvestment represents capital investment, less divestment proceeds).This amount relates largely to investments in projects where the finalinvestment decision has already been taken or is expected to be takenin 2010. This excludes any impact of the indicative offer to acquireArrow Energy Limited.

Growth delivery

Organic capital investment is expected to be $25 to $30 billion per year for 2011 to 2014, as Shell invests for longterm growth. Annual

spending will be driven by the timing of investment decisions and thenearterm macro outlook.

Cash flow from operations excluding working capital was $24 billionin 2009. Shell expects cash flow to grow by around 50% from 2009 to2012 assuming a $60 oil price and a more normal environment fornatural gas prices and downstream. In an $80 environment, 2012 cashflow should be at least 80% higher than 2009 levels.

In Downstream, Shell is adding new chemicals capacity in Singaporeand refining capacity in the USA, and making selective growthinvestment in marketing.

Oil and gas production is expected to average 3.5 million boe/d in

2012, compared to 3.1 million boe/d in 2009, an increase of 11%,and with confidence of further growth to 2014.

Maturing next generation project options

Shell has built up a substantial portfolio of options for the next wave of growth. This portfolio has been designed to capture price upside, andminimise Shell’s exposure to industry challenges from cost inflation andpolitical risk. Key elements of this opportunity set are in the Gulf of Mexico, USA and Canada tight gas, and Australia LNG. These are theprojects that have the potential to underpin production growth to theend of the decade. Shell is working to mature these projects, with anemphasis on financial returns.

Reserves and production

Shell added 4,417 million boe of proved oil and gas reserves beforeproduction, of which 3,632 million boe comes from Shell subsidiaries

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and 785 million boe is associated with the Shell share of equityaccounted investments. Included in the 4,417 million boe is1,630 million boe of synthetic crude oil reserves. Last year, we hadreported 997 million boe of proven minable oil sands reserves as of December 31, 2008. As a result of the SEC rule changes these provenminable reserves have been converted to synthetic crude oil provedreserves and are included in the 1,630 million boe. Accordingly we

will no longer be reporting proven minable oil sands reserves. Theincrease of 4,417 million boe of proved oil and gas reserves alsoincludes approximately 270 million boe associated with other SECchanges in proved reserves reporting. Furthermore, for the first time wehave included 599 million boe proved reserves associated with futureproduction that will be consumed in operations (for example, as fuelgas). Finally, the total additions reflect a net positive impact fromcommodity price changes of approximately 260 million boe provedreserves.

In 2009, total oil and gas production available for sale was1,147 million boe. An additional 40 million boe was produced andconsumed in operations. Production available for sale from subsidiarieswas 828 million boe with an additional 35 million boe consumed in

operations. The Shell share of the production available for sale of equityaccounted investments was 319 million boe with an additional5 million boe consumed in operations.

Accordingly, after taking into account total production we had a netincrease of 3,230 million boe in proved oil and gas reserves of which2,769 million boe is from subsidiaries and 461 million boe isassociated with the Shell share of equityaccounted investments.

Details of Shell subsidiaries’ and the Shell share of equityaccountedinvestments’ estimated net proved reserves are summarised in the tableon page 29 and are set out under the heading “Supplementaryinformation – Oil and gas” on pages 140149.

Research and developmentIn 2009, our research and development (R&D) expenses were$1,125 million, compared with $1,230 million in 2008 and$1,167 million in 2007.

Our R&D programme adapts and applies technologies that reduce theenergy requirements, environmental impacts and running costs of ourcurrent operations. It also develops technologies that help us capitaliseon businessgrowth opportunities, both in Upstream and inDownstream. And it can create entirely new technologies, such as thoseneeded for alternative fuels or carbon capture and sequestration, whichmay become part of the world’s energy system in the longer term.

The technologies we created, developed and applied in our businesses

during 2009 certainly spanned that wide range of purpose. Forexample, our current operations were made more efficient by the manySmart Field implementations that optimised production from oil and gasfields and by the catalysts we manufactured for the nearly completedPearl GTL plant. New exploration prospects were identified in theMiddle East and Africa with novel seismic survey technologies. Andnew markets were opened by our high mileage FuelSave gasolineformulation, which was launched in various countries. Unprecedentedtechnological achievements were also in the works in 2009, so that wecan build a floating LNG plant for the offshore Prelude and Concertofields of Australia and realise a fullscale cellulosetoethanol plant fornextgeneration biofuels.

With the Transition 2009 reorganisation, we sharpened the

accountability for delivery of all aspects of our R&D programme. Wealso linked the programme’s projects more closely with the business

that stands most to profit from what they deliver. In doing so, we alestablished useful links between our Upstream and Downstreamtechnologies. The new R&D organisation also enables us to introdufurther simplification and standardisation in the way we manage tdevelopment of technology.

Our R&D programme for 2010 will remain on the same general co

as that for 2009. But it will benefit from the clearer lines of sight noestablished between a technology’s creation and its ultimatedeployment in the field.

Key accounting estimates and judgementsPlease refer to Note 3 to the Consolidated Financial Statements fodiscussion of key accounting estimates and judgements.

Legal proceedingsPlease refer to Note 28 to the Consolidated Financial Statements fdiscussion of legal proceedings.

Audit feesPlease refer to Note 29 to the Consolidated Financial Statements f

discussion of auditors’ fees and services.

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UPSTREAM

KEY STATISTICS $ MILLION

2009 2008 2007

Revenue (including intersegment sales) 55,140 88,308 67,278

Segment earnings 8,354 26,506 18,094

Including:

Production and manufacturing expenses 13,958 13,763 13,122

Selling, distribution and administrative

expenses 2,206 2,030 2,015

Exploration 2,178 1,995 1,822

Depreciation, depletion and amortisation 9,875 9,906 9,913

Share of profit of equityaccounted investments 3,852 7,521 5,446

Capital investment 23,951 32,166 21,362

Oil and gas production available for sale

(thousand boe/d) 3,142 3,248 3,315

LNG sales volume (million tonnes) 13.40 13.05 13.18

Proved reser ves (mil lion boe) [A] 14,132 10,903 10,809

[A] Excludes minority interest. Minable oil sands reserves of 997 million boe in

2008 and 1,111 million boe in 2007 are not included in the proved

reserves.

Overview Our Upstream businesses explore for and extract crude oil and naturalgas, often in joint ventures with international and national oilcompanies. We liquefy natural gas by cooling and transport it tocustomers across the world. We also convert natural gas to liquids(GTL) to provide cleaner burning fuels. Upstream markets and tradesnatural gas and power in suppor t of our businesses. We extract bitumen– an especially thick, heavy oil – from mined oil sands and convert it tosynthetic crude oil. We are also developers of wind power as a meansto generate electricity.

Earnings 2009-2007

The economic environment in 2009 was a challenge to both Shell andthe industry. According to the International Energy Agency, the 2009oil demand decline of 1.5% is the largest decline since 1982. Similarly,we faced gas demand declines in Europe and the USA of some 7% and2% respectively. At the same time, global liquefied natural gas (LNG)capacity increased by 20% in 2009, exerting downward pressure onglobal gas prices. Spot gas prices were significantly lower in 2009than in 2008. Much of Shell’s natural gas and LNG portfolio has termcontracts with price realisations that trailed oil price trends, typically by4 to 6 months. Gas production represented 47% of total production of 3,142 thousand boe/d. The chart below illustrates the significantdifference in direction between Shell’s realised prices for oil and gas in2009.

REAL ISED PRICE $/BOE

$120

$100

$80

$60

$40

$20Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 2008 2008 2008 2009 2009 2009 2009

OilNatural gas

Segment earnings in 2009 were $8,354 million, 68% lower than in2008. The decrease in 2009 from 2008 was mainly due to significantly

lower realised oil and gas prices. Higher costs and lower sales volumesalso contributed slightly to the decline. The earnings decline was partlyoffset by lower royalties, lower taxes and higher trading contributions.Additionally, 2009 earnings included a net charge of $134 millioncompared with net gains of $3,487 million in 2008. The net charge of $134 million in 2009 mainly relates to impairments and redundancycharges, partly offset by exceptional tax items, and divestment gains.

The net gains of $3,487 million in 2008 mainly related to thedivestment of assets in Australia, Canada, Germany, the Netherlands,Nigeria, the UK and the USA, which were partly offset by themarktomarket valuation of certain UK gas contracts and anexceptional tax charge due to new legislation in Italy.

While natural gas production was flat in 2009, LNG sales volumes of 13.40 million tonnes were 3% higher than in 2008. This increasereflected the rampup in sales volumes from the Sakhalin II LNG projectand Train 5 at the Australian North West Shelf project, which were partlyoffset by lower volumes from Nigeria LNG and reduced LNG demanddue to the recession.

Segment earnings in 2008 were $26,506 million, 46% higher than in

2007, due to the impact of higher realised oil and gas prices. This waspartly offset by lower production volumes, particular ly in the USA,where hurricanes affected operations. Higher taxes, royalties andexploration costs also reduced 2008 earnings. Net gains of $3,487 million in 2008 compared with net gains of $1,471 million in2007. The net gains in 2007 mainly related to asset divestments andvarious taxation credits, which were partly offset by the marktomarketvaluation of certain UK gas contracts and a charge mainly relating tothe onshore assets in Nigeria, including impairments and provisionsarising from the funding and security situation there.

Capital investment, portfolio actions andbusiness developmentCapital investment in 2009 was $24 billion. This represents a 26%

decrease from 2008, which included over $8 billion in acquisitions,primarily relating to Duvernay Oil Corp. Capital investment includedexploration expenditure of $4.5 billion (2008: $11.0 billion).

In Abu Dhabi, Shell signed an agreement with Abu Dhabi National OilCompany (ADNOC) to extend the GASCO joint venture for a further20 years.

In Australia, Shell and its partners took the final investment decision(FID) for the Gorgon LNG project (Shell share 25%). Gorgon willsupply global gas markets to at least 2050, with a capacity of 15 million tonnes (100% basis) of LNG per year and a major carboncapture and storage scheme.

Shell has announced a frontend engineering and design study for afloating LNG (FLNG) project, with the potential to deploy these facilitiesat the Prelude offshore gas discovery in Australia (Shell share 100%).

In Australia, Shell confirmed tha